Illiquid assets account for around 22% of UK life insurers’ investments

Written by Adam Cadle

06/06/2023

Illiquid assets, including property, mortgage debt and private equity holdings, account for around 22% of UK life insurers’ investments compared with 13% in 2017, Moody’s has revealed.

The sector’s shift into illiquid assets also reflects strong sales of bulk purchase annuities (BPAs), which allow companies to transfer their defined benefit pension risk to insurers in return for a premium, Moody’s stated.

Despite rising risks, the pros of illiquid assets still outweigh the cons for UK life insurers, Moody’s argued.

“Illiquids can be of high quality and match well against annuity liabilities, reducing reinvestment risk. They also carry a profit enhancing illiquidity premium that supports insurers’ ability to write new BPA deals. UK life insurers’ strong overall liquidity, the high quality of their illiquid portfolios, and their good ability to originate and manage these assets underpin these benefits.”

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